Delhi High Court
Delhi High Court

Are E-commerce sites violating FEMA provisions? Delhi HC issues notice

Smrithi Suresh

The Delhi High Court today issued notice on a petition seeking an inquiry into possible FDI violations by e-commerce websites.

The petition, filed chartered accountant Dinesh Kothari, and activist Amulya Nidhi has impleaded the Ministry of Finance, Department of Industrial Policy & Promotion, Ministry of Corporate Affairs, the Enforcement Directorate and the Governor of Reserve Bank of India.

Kothari and Nidhi have sought an investigation into the alleged illegalities being committed by companies receiving FDI through violation of the Foreign Exchange Management Act (FEMA), 1999 and FDI policy governing retail.

The plea also goes on to state,

“…the said FDI recipient Companies are circumventing and violating the FEMA/FDI policies and the related laws/tax regimes etc. by exclusively dealing/transacting with/through their closely held/controlled non-FDI recipient sister/associate Companies/websites with the Customers in Retail Sectors (where FDI is prohibited) through “Business to Customer (B2C) platform” (where FDI is prohibited) under the garb of other permissible route and Business to Business (B2B) platform (where FDI is permissible)… “

The petition further outlined similar proceedings pending before a different Bench of the High Court. In that matter, the government had stated that  investigations were underway in connection with 21 e-commerce sites. Highlighting this statement, the plea requested a ‘thorough investigation against all such FDI recipient entities.’

Today when the case came up for hearing before a Division Bench of Chief Justice G Rohini & Justice Jayant Nath, the Bench issued notice and sought a reply from the Government regarding the latest circular of RBI governing FDI policy.

The case will now be heard on February 24.

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